08.01 - Request for Proposals for Water/Sewer Rate Study

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Terms Used in This Report Affordability Index The monthly charge for 5,000 gallons of residential service divided by the median monthly household income for the area served by the system. An index of 1.0, meaning a household pays one percent of its income to pay its bill, is considered affordable. Capital Improvement Anticipated capital improvements. These are the more expensive Plan or Program (CIP) items such as water towers, treatment plants and lines, that generally require bond or grant funding. They do not include equipment Capital Improvement Cash reserves generally used to fund the CIP Reserves Coverage Ratio (CR) Incomes and reserves available to pay debt divide by the amount of the debt for that year. Most systems should have a CR of 1.25 or Current Position For a year, the sum of all incomes and reserves minus all financial obligations for that year. This is a good measure of overall financial health. Impact Fee Generally, a charge assessed to a property being connected to the system that recaptures all or part of the cost of the infrastructure needed to provide service to that connection. Infrastructure Hard assets, such as water towers, treatment plants and lines needed to provide service to customers connected to the system Operating Ratio (OR) Current incomes and undedicated reserves minus current expenses, not including debt. An OR of 1.0 is "break even." Most systems should have an OR of 1.25 or higher. Replacement A timetable that describes equipment replacement and important Schedule repairs that are too infrequent and/or too expensive to cover as annual operating costs but not so expensive that they need to be covered as capital improvements. Replacement Cash reserves used to fund the Replacement Schedule Tap fee Charge for allowing a property to be connected to the system. This fee may or may not include equipment or work provided by system staff. Test Year The one year period from which data was gathered to be the basis of the analysis User Fee, User Fees assessed to customers for use of the system. Does not include Charge tap fees, impact fees or other charges assessed when a property is first connected to the system. Working Capital (Net The amount left in the operating fund after paying all costs due during Income) that month year or other time period. Working capital of$0 is "break Working Capital Goal The desired percentage above "break even" for the operating fund. Small systems (a few hundred connections) generally should target 35 percent or greater. Larger systems can target less, down to a minimum of about 20 percent for systems with 5,000 or more connections.